Demonetization: Rise of Digital Economy in India

On 8th November 2016, Indian Prime Minister Shri Narendra Modi announced that note of Rs 1000 and 500 will not remain legal tender from 9th November 2016. This was a historic decision made by our PM. These notes were canceled from the market. Any person who has those note is given a time limit so that they can exchange that money or deposit that money to banks. They can deposit these notes to bank till 30th of December 2016.

86% of Indian currency was made of these notes of 500 and 1000 rupees notes.

So the question arises here what really black money is?

What is Black Money?

Money which is obtained by illegal manner or the money on which taxes are not paid is called black money. Black money has many forms. People who have black money tries to hide this money, They buy gold, real estate etc. Black money can be hoarded as cash, gold, real estate or many other ways. Demonetization is an attack on cash black money. It can be considered as first steps for curbing of black money.

Why was Demonetization needed ?

India is a huge country and India is facing a lot of problems like terrorism, counterfeit currency, Naxalite problem, black money and many more problems. Our neighbor country Pakistan is said to have the press which was used to print Indian currency. Pakistan was making a profit of 30 to 40 percent by using this counterfeit currency. This money was used in terrorist activities in India.

After the Death of terrorist Burhan Wani Jammu and Kashmir was going through unrest sponsored by Pakistan. People were being paid by this black money to throw stones at Indian security forces. After this demonetization, this will be controlled.

It is not easy to check every transaction happening in cash. In India, hawala was used to send money to one place to another place. This is against law and it gave birth to the parallel economy. In hawala, every transaction was happening in cash which was not easy to be tracked by agencies of India. In hawala business mostly these 500 and 1000 rupee notes were used because of these notes high denomination it was easy to transport.

Another problem occurred was RBI did not have full information about whole currency in the market. It was very difficult to account money which was in use.

The price of real estate and gold were increasing because people were investing their black money into these things. These are some reasons of why demonetization was needed.

Effects of Demonetization

When this announcement was made public, our PM said that this transition from old currency to a new currency will be little unhandy. Because India has a population of more than 125 crores of people. every person who has a bank account will have to go the bank and then he or she has to deposit money they have. This made longer queues in front of banks and ATMs. Following announcement was made to curb people’s uneasiness.

They were given 50 days to deposit their money in the bank.

Initially, 15 days were given for exchanging their money from the bank. People were said that they can change money worth 4000 with their old notes.

old notes can be used at the petrol pumps, government hospitals, for paying government bills etc.

Longer queues can be looked in front of banks or ATMs. People are in line to deposit their money in the bank. Although people are facing some problem but still they are supporting this move by Narendra Modi. They are saying that it is a little bit uncomfortable to get in lines for money but it is good for the future of our country.

Opposition parties are opposing this scheme because they think people should be given some time to adjust with the new currency. One of the opposition leaders urged the government to give 7-day relaxation to people. Aam aadmi party leader Arvind Kejriwal has said that it is one of the biggest scams of Indian history. Although he came to power by the anti-corruption drive in India under a banner of India against corruption. Trinamool Congress leader Mamta Banerjee has opposed this decision. Rajyasabha and Loksabha are also interrupted by opposition parties.

People have also suffered it, many people have died in the bank line. People who have marriages at their homes also suffered from this decision. They were facing troubles due to demonetization. Small traders whose business run on cash only has also suffered a blow to their business. Farmers also not getting a good price for their crops. They are selling their crops at the lower price due to unavailability of cash.

Demonetization and Digital Economy

The whole process of demonetization is to push Indian people towards a cashless economy. A cashless society will be a better solution for the Indian economy. The government is pushing digital payment measures like credit cards, debit cards, e-wallets etc. The government has also waived off charges on transactions made by digital methods.

A lot of companies like Paytm, Mobikwik, Oxygen are providing e-wallets to the Indian consumers. They can use those wallets to make payment. A lot of small traders are started using swap machine to collect payment directly to their bank account.

Akodara: First cashless village in India

Akodara is situated in Gujrat, It is 60 miles away from northern Ahmedabad. In Akodara people use digital payment methods to buy everything from flour to grocery items. A private bank adopted this village under digital India initiative and taught people about using the cashless system of payment. There are no long queues before banks. People of Akodara have become an inspiration to whole India.

This move by PM Narendra Modi is a move against the black money and many other issues like terrorism, counterfeit currency, Maoist problem etc. People of India are supporting this, It is a long due change which Indian people were waiting for. Previous governments were doing politics over black money and they did not try anything to curb the black money. India is not only changing currency but also going towards a cashless economy. We hope this move will be successful and it will block cash from black money.